Ticker Symbol: XOM
Exxon shares jumped to an all-time high in morning trading as oil prices continued to rise due to a tight market. The company’s stock is up around 73% on a year-to-date basis as West Texas Crude Oil is up 59% in the same period, while Brent Crude is up 56%. Exxon is the largest integrated oil and gas company in the United States. Energy is also currently the top performing sector in the S&P 500 Index for the year. While the index is down 13% for 2022, the energy sector is up 65%.
Russia’s invasion of Ukraine has thrown world commodity markets into turmoil, with surging energy prices benefitting the largest producers globally. Exxon is the fourth largest global producer of oil. Along with being the largest U.S. oil producer, Exxon also benefits from having one of the biggest refining operations in the country.
The company has also benefited from higher margins in its’ refining business. Crack spreads, defined as the spread between the underlying price of crude oil and refined products such as diesel and gasoline, have surged during this year due to limited refining capacity in the U.S. Low inventory levels, relative to this time of the year, has pushed average gasoline prices to all-time highs in the U.S. recently.
Exxon also produced roughly 8.5 billion cubic feet of natural gas in 2021. With Henry Hub Natural Gas prices hitting a 14-year year high recently, the company would also benefit from being one of the lowest cost producers of the commodity in the world. Liquified Natural Gas (LNG) prices are also through the roof, as Western Europe seeks to curtail its dependence on Russian gas.
The company expects higher volumes for the second quarter of 2022 with volume growth from the Permian Basin and Guyana. It also expects favorable lag timing in LNG pricing. Its’ chemical products business should go through routing maintenance and turnarounds but would benefit from higher margins in that vector as well. With oil prices predicted to average roughly $130 a barrel in the second half of 2022, the company should be producing high free cash-flow through all of its’ business around the globe.
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